Amazon rallies associates to battle Apple's iTunes share

Online retailer Amazon is planning to use its referral system as an edge against Apple's iTunes Store by offering major incentives to sites that link to its MP3 store.

Having begun its existence selling books, Amazon told members of its Associates program on Wednesday that they could earn 20 percent for every referred sale from the company's new MP3 store until the end of 2007. Up to $1.50 from each album or song sold would go to the affiliate, according to a message sent to Amazon's partners.

The move was aimed at providing a jumpstart to Amazon's fledgling direct-download service, which launched in late September with a unique focus on carrying only music without digital rights management (DRM). By providing a more immediate financial reward, the company hoped to see more websites link to songs offered on Amazon MP3 alongside their usual fare —and potentially, in place of links to competing music stores.

In contrast, Apple's iTunes referral program currently offers 5 percent of each sale to an affiliate, or just one quarter of Amazon's promised share. Normal referrals would still provide double the amount of the Apple store at 10 percent.

Amazon's approach escalates an increasingly direct conflict with Apple for control of the download music business, which started when the former began selling DRM-free songs at 99 cents or less versus Apple's $1.29. Apple responded in mid-October by dropping iTunes Plus prices to a similarly low level.

Apple also challenged Amazon's claim of holding the largest catalog of unprotected music, listing songs from significant independent labels like Sub Pop as well as its existing EMI library. Amazon's store includes some independents but also enjoys the support of Universal Music, which is conducting a trial run of DRM-free songs on several large online stores but has refused the same deal for Apple. Universal recently opted out of long-term contracts with the iTunes operator and is widely reported to be using its experiment as a means of curbing Apple's dominance of online music.